The Bull Bear Trader discusses market events and news with an interest in understanding risk and return in both bull and bear markets. Discussion topics include trading and hedging strategies, derivatives, risk management, hedge funds, quantitative finance, the energy and commodity markets, and private equity, as well as an occasional investment opinion.

Driven by a declining housing market, and aided by the Treasury Secretary's recent decision, hedge funds that bet against Fannie and Freddie racked up big gains on Monday (see Reuters article). Hedge fund Seabreeze Partners, run by short-seller Doug Kass, was short both companies. Kass's big bet has helped his fund to be up over 25% this year. William Ackman's Pershing Square Capital Management has also made money betting against Fannie and Freddie. Short-sellers have often been vilified, but now they have reason to gloat, causing one hedge fund manager to state: "I don't know how they could get it so wrong. There were so many red flags. I feel sorry for them." One trader that was not as fortunate was Legg Mason manager, Bill Miller, who had increased his holding in Freddie to 79.8 million shares, causing his fund to be off 31 percent for the year. Miller had previously beaten the S&P 500 for 15 years. Some speculate that the Freddie Mac losses may put pressure on Miller to step aside. The old saying, "So what have you done for me lately" never seemed so brutal.